Rite Aid to 'fade away' under Walgreens takeover, experts say

Updated on Nov 05, 2015 at 11:23 AM EST

Business experts say the prospects for a continued long-term corporate presence and employment in what will no longer be Rite Aid's central Pa. headquarters after the Walgreens takeover are anything but assured.

Business experts say the prospects for a continued long-term corporate presence and employment in what will no longer be Rite Aid's central Pennsylvania headquarters after the takeover are anything but assured.

Neither Walgreens nor Rite Aid has shed much light on what might be in store for the future of the Rite Aid headquarters and its employees. And a Rite Aid spokeswoman did not immediately respond to PennLive's questions on the issue this week. But clearly, Walgreens will be looking to help pay for the expensive deal by cutting costs of the combined companies - what Walgreens refers to as "synergies" from the takeover.

"All the talk about savings with synergies?" noted David E. Black, president and CEO of the Harrisburg Regional Chamber & CREDC.

"That means downsizing," he said. "And the downsizing is rarely with the acquiring company. What happens to this corporate office? Obviously, it is not going to be headquarters for Walgreens. If you are here and you work at Rite Aid or you have a family member there, what happens?"

As a student of such corporate acquisitions, bond analysts Kimberly Noland, who covers Rite Aid, and Carol Levenson, who covers Walgreens, both for the New York firm Gimme Credit, attempted to shed some light on the future that may be in store for the Rite Aid headquarters and its employees post-takeover.

"Whether they fire everybody or how long it takes to shut it down - they wouldn't say," Noland said of the two companies. "I usually don't comment on what is going to happen with corporate headquarters. It is very touchy subject, and no one has specifics."

But there are common themes. Top Rite Aid executives and others with employment contracts will likely get buyouts, she said. Some of the payouts will have eye-popping numbers.

"People are going to walk away with quite a bit of money," Noland predicted.

As for what remains of Rite Aid's corporate operations? Levenson pointed to the aftermath of Walgreens' acquisition of drug store chain, Duane Reade, for possible hints.

"If you look at a previous Walgreens' acquisition, Duane Reade, for example, it still maintains a corporate headquarters and staff in New York," she said. "On the other hand, I'm sure every 'redundant' corporate staff position will be carefully scrutinized for potential cost savings."

"Any substantial loss of jobs would have a devastating impact on families, the local community and the economy of Pennsylvania," Casey writes.

"The Rite Aid headquarters have been an essential part of the Camp Hill/East Pennsboro Township community for decades. It plays a critical role in small business development and is a staple of the community. I look forward to any opportunity to work with you to maintain these jobs, and to utilize any federal programs that may be relevant," he concludes.

Whether Casey's words will have any effect on Walgreens' long-term plans is another matter.

And what of Rite Aid, itself, as a brand?

Black, who knows marketing, predicts Rite Aid stores could remain for some time, at least in Central Pennsylvania, but eventually Walgreens will want to consolidate its national marketing behind a single name and brand - its own.

"I think Rite Aid will fade," Black predicted. "It is not a brand like Heinz," which, too, was bought out.

"This is going to be a long haul," Black added. "We may not see immediate change. But overtime, this is going to start."

Then, slowly, but surely, the home-grown company may be systematically dismantled and swallowed by the bigger pharmaceutical-selling fish, Walgreens. Such is the way of the corporate world -- a trend that Black and other economic development officials still plan to fight by pointing out the value of the local workforce and the midstate location as a possible regional outpost for Walgreens.

"We are seeing consolidation; that is the common theme," Black concluded. "Everybody is squeezing at all levels. That is the nature of survival in business, unfortunately."